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Moody’s expects Turkish recession, contraction in 2019

Turkey’s economy will contract in the first two quarters of next year, meaning the country will be in a technical recession after a currency crisis pummelled domestic demand, according to Moody’s.

The economy will probably contract by 2 percent in 2019 after growth of 1.5 percent this year, Moody’s said in a report outlining its global macro-economic outlook.

Moody’s cited a currency crisis that erupted in the country in August, along with high interest rates on loans, which are leading to a slump in demand for products such as cars and white goods as spending power declines.

The Turkish economy will probably recover in 2020 with growth of 3 percent, Moody’s said.

Inflation in the country is expected to accelerate to 27 percent by the end of the year from 25.2 percent in October, before slowing to 18 percent in 2019 and 12 percent in 2020, Moody’s said in the report.

Moody’s had praised Turkey's economic growth as “resilient” in its annual report last November.

The ratings agency’s prediction for growth rates in Turkey is more pessimistic than that of the International Monetary Fund, which said last month that it expected the country’s economy to expand 0.4 percent in 2019. The government’s forecast is for growth of 2.3 percent.